VBCE Weekly Foreign Exchange Wrap Up for Feb. 18 – Feb. 22, 2019

Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca

The GBP and the CAD were the best performing currencies this week. Early in the week, USDCAD climbed to 1.3285 before falling to 1.3150 on broad-based USD weakness. The USD and the JPY were broadly weaker on market optimism over U.S. / China trade relations. The CAD lost ground during Thursday's session on comments from the Bank of Canada: "We judge that we will need to move our policy rates up into a neutral range over time, to a point where it is not stimulating or constraining economic growth. However, the path back to that neutral range is highly uncertain. We will watch the data as they come in, and use judgement." USDCAD climbed from 1.3163 up to 1.3245 before reversing sharply and ending the week near 1.3130 – 3 week lows. Canadian retail sales data was not as bad as initially feared while oil prices rallied sharply (3%+) to trade near $58 – the highest level since mid-November 2018.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3255

1.3130

1.3285

1.3140

EURCAD

1.4970

1.4891

1.5037

1.4900

GBPCAD

1.7113

1.7055

1.7297

1.7160

JPYCAD

0.01199

0.01186

0.01201

0.01187

AUDCAD

0.9455

0.9331

0.9489

0.9367

Key Events for the week:

*USDCAD declines towards 3 week lows

*EUR holds near 3 month lows

*GBP near 1 month highs

*JPY declines towards 2 month lows

*AUD holds near 4 month lows

*WTI oil gains as much as 4% towards mid Nov 2018 highs (range $55.72 - $57.92)

*USD index (DXY) declines towards 2 week lows – from 97.08 to 96.29

*Japan machinery orders y/y: 0.9% (exp 0.4% / prev 0.8%)

*UK average earnings incl. bonus: 3.4% (exp 3.5% / prev 3.4%)

*German ZEW survey – economic sentiment: -13.4 (exp -14.0 / prev -15.0)

*Japan imports y/y: -0.6% (exp -2.8% / prev 1.9%)

*Japan exports y/y: -8.4% (exp -5.5% / prev -3.9%)

*Australian employment change: 39,100 (exp 15,000 / prev 16,900)

*Australia unemployment rate: 5% (exp 5% / prev 5%)

*Germany CPI harmonized y/y: 1/7% (exp 1.7% / prev 1.7%)

*Germany Markit manufacturing index: 47.6 (exp 49.7 / prev 49.7)

*Eurozone Market manufacturing index: 49.2 (exp 50.3 / prev 50.5)

*U.S. durable goods orders: 1.2% (exp 1.5% / prev 1.0%)

*Japan national CPI ex food & energy y/y: 0.4% (exp 0.4% / prev 0.3%)

*Germany GDP y/y (Q4): 0.9% (exp 0.9% / prev 0.9%)

*Eurozone CPI y/y: 1.4% (exp 1.4% / prev 1.5%)

*Canada retail sales: -0.1% (exp -0.3% / prev -0.9%)

*U.S. 10 year Treasury yields hold near 1 year lows (2.64% - 2.69%)

On Tap for Next week:


Tue Feb 26: UK PM Theresa May speech

U.S. Fed chair Powell speech

U.S. housing starts: -11.2% (exp -0.5% / prev 0.4%)

Wed Feb 27: Canada CPI m/m: 0.1% (exp 0.2% / prev -0.1%)

Canada CPI y/y: 1.4% (exp 1.5% / prev2.0%)

EIA crude oil stocks change: -8.647 million (exp 2.842m / prev 3.672m)

Japan industrial production m/m: exp -2.5% / prev -0.1%

Japan retail trade y/y: exp 1.1% / prev 1.3%

Thur Feb 28: Germany CPI y/y: exp 1.7% / prev 1.7%

U.S. GDP Q4 annualized: exp 2.3% / prev 3.4%

Japan Tokyo CPI ex fresh food y/y: exp 1.0% / prev 1.1%

Japan unemployment rate: exp 2.4% / prev 2.4%

Fri Mar 1: China Caixin mfg. PMI: exp 48.7 / prev 48.3

Germany unemployment rate: exp 5% / prev 5%

Eurozone unemployment rate: exp 7.9% / prev 7.9%

Eurozone CPI core y/y: prev 1.1%

U.S. retail sales control group: prev -1.7%

Canada GDP (Dec): prev -0.1%

Canada GDP Q4 annualized: prev 2.0%

U.S. ISM manufacturing PMI: exp 56.2 / prev 56.6

Technically, USDCAD is neutral / bearish. The pairing failed to break back above the 1.33 level and closed below last week's 1.3196 low. USDCAD finishes the week near a 3 week low with the February 1st low of 1.3068 clearly in sight.

Topside targets to consider: 1.3200, 1.3240, 1.3285, 1.3320

Downside targets to consider: 1.3130, 1.3085, 1.3050, 1.3000

Sources: Reuters, Bloomberg, FXStreet, RBC Capital Markets, Bank of Canada.S. Federal Reserve, CNBC, Forexlive, CME Group

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The information and opinions contained herein are gathered from sources which are thought to be reliable but the reader should not assume that the information and opinions are official or final. VBCE makes no warranty concerning the accuracy of the information and opinions, and accepts no liability for the consequences of any actions taken on the basis of the information and opinions provided. The content is for general information only and does not constitute in anyway giving financial advice.